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12.8. Monitoring and Evaluating Marketing Performance

Once the plan has been implemented managers need to make sure it works in practice. Feedback is essential for monitoring performance, and (in an ideal world) no marketing activity would be undertaken without having a monitoring and evaluation system in place beforehand. There are two basic groups of approaches for performance analysis:

Sales analysis, which looks at the income generated by the firm's activities; and

Marketing cost analysis, which looks at the costs of generating the income.

Considerable amounts of information will be needed if the firm is to make effective use of sales analysis to monitor activities. This may involve the firm in substantial market research expenditure, since market research is the cornerstone of monitoring and evaluation.

Evaluating customers is a particularly important exercise in a relationship marketing scenario. Estimating customer equity (the value of the customers) can be complex: it is a combination of deciding on the profitability of the customer (i.e. a comparison between cost of serving the customer and revenue which will result), lifetime value of the customer (how long the relationship is likely to last, coupled with frequency and quantity of purchase), and likely loyalty of the customer (if the customer is likely to defect to a competitor the customer's value will be low).

Once calculated, however, customer equity can be used to focus marketing efforts on the most valuable customers. The other part of the picture is to examine the cost of achieving the goals which have been specified. Marketing cost analysis is a set of techniques for breaking down the costs of the firm's activities and associating them with specific marketing objectives. Costs can be broken down (broadly) into:

Direct costs such as salespersons’ salaries which can be directly attributable to a given activity;

Traceable common costs such as costs of advertising that can be traced back to specific products; and non-traceable common costs such as the cost of PR or corporate advertising that cannot be allocated to any particular product range or brand.

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